Collaborative economy report response: June 2018

5. Finance In The Collaborative Economy

The Panel highlighted the growth of the collaborative finance sector and the role it can play in helping individuals and businesses to access capital, contributing to inclusive growth. It noted the benefits of crowdfunding to community and arts projects and identified that the growth of the collaborative finance market has seen a progressive and sensible route of engagement with the FCA working with platforms and the UK Crowdfunding Association. The Panel recommended testing how ‘matched’ crowdfunding can be used to support citizen-led innovation and community projects.

Scottish Government response

Crowdfunding is an emerging source of finance involving open calls to the public, generally via the internet, to finance projects through donations, sometimes in exchange for a reward, product pre-ordering, lending, or investment. Any organisation can launch a crowdfunding campaign: SMEs, artists, innovative start-ups, communities and social entrepreneurs may all benefit from different forms of crowdfunding.

Crowdfunding can offer more than just financial benefits. It can give access to a large number of people who may be interested in a project or business who could provide valuable insights and information. Crowdfunding can be a way of testing wider views and support for a project or concept.

Angus Council presented to the Panel in August 2017. Its partnership with Crowdfunder was noted as an innovative one which supports Angus community organisations, businesses, individuals and social enterprises. Since its launch in August 2015, the Crowdfund Angus portal has supported 40 local projects and raised over £159,488 to the period August 2017.

We note the Panel’s recommendation in relation to testing how ‘matched’ crowdfunding can be used as a mechanism to support citizen-led innovation and community projects. We consider that the development of new Business Improvement Districts, where businesses work together to invest in local improvements in an area, provide opportunities to further explore matched crowdfunding in the tourism sector.

Our enterprise agencies have been looking to expand the sources of funding available to grow SMEs that often struggle to secure funding via traditional lending. In the first initiative of its kind in Scotland, the Scottish Investment Bank, the investment arm of Scottish Enterprise, is providing £2.75 million in a joint initiative with Lending Crowd. Lending Crowd provides a peer to peer platform that links private sector investors with SMEs. The Scottish Investment Bank and Scottish Enterprise also held series of Crowdfunding Options seminars across Scotland in November 2017 to increase awareness of the crowdfunding market in Scotland.

Next steps

• In light of the opportunities offered by the development of new Business Improvement Districts, we will work with communities and stakeholders to test how matched crowdfunding can support citizen-led innovation, community projects and the wider tourism sector.